Chapter 5: Planning Projects, Part II (Quality, Human Resource, Communications, Risk, and Procurement Management)

Chapter 5:Planning Projects, Part II(Quality, Human Resource, Communications, Risk, and Procurement Management) Note: See the text itself for full citations.

Learning Objectives • List several planning tasks and outputs for project quality, human resource, communications, risk, and procurement management • Discuss the project quality management planning tasks, • and explain the purpose and contents of a quality management plan, project dashboard, quality metrics, and quality checklists • Explain the project human resource management planning tasks, • and create a human resource management plan

Learning Objectives (continued) • Describe the project communications management planning tasks, • and describe the importance of using a project communications management plan and project Web site • Discuss the project risk management planning tasks, • and explain how a risk management plan, a probability/impact matrix, a risk register, and risk-related contractual agreements are used in risk management planning • Discuss the project procurement management planning tasks, • and explain a make-or-buy analysis, procurement management plans, requests for proposal/quote, contract statements of work, and supplier evaluation matrices

Introduction • Some project managers neglect planning • in the quality, human resource, communications, risk, and procurement management knowledge areas • It is important to skillfully plan all knowledge areas • because they are all crucial to project success

Figure 5-1. Planning Processes and Outputs for Project Quality, Human Resource, Communications, Risk, and Procurement Management (Note: Corrected Version)

Project Quality Management Planning Tasks • Project quality management ensures that • the project will satisfy the stated or implied needs for which it was undertaken • Key outputs produced as part of project quality management include • a quality management plan, • project dashboard, • quality metrics descriptions, • and quality checklists

What Is Quality? • The International Organization for Standardization (ISO) defines quality as • “the degree to which a set of inherent characteristics fulfill requirements” (ISO9000:2000) • Other experts define quality based on conformance to requirements and fitness for use. • Conformance to requirements means that the project’s processes and products meet written specifications • Fitness for use means that a product can be used as it was intended • The customer ultimately decides that the quality level is acceptable

Quality Planning and the Quality Management Plan • Quality planning includes • identifying which quality standards are relevant to the project • and how best to satisfy those standards • It also involves designing quality into the products of the project as well as the processes involved in managing the project • Like other plans, the size and complexity of quality management plans varies to meet project needs

Quality Metrics • A metric is a standard of measurement • Metrics allow organizations to measure their performance in certain areas • and to compare them over time or with other organizations • Examples of common metrics used by organizations include • failure rates of products produced, • availability of goods and services, • and customer satisfaction ratings

Sample Quality Metrics The Just-In-Time Training project’s success criteria, as documented in the scope statement, included metrics based on: • Time: Completing the project within one year • Customer satisfaction: Achieving an average course evaluation of at least 3.0 on a 5.0 scale • Cost reduction: Recouping the cost of the project in reduced training costs within two years after project completion Many organizations use charts to keep track of metrics, • such as a project dashboard—a graphical screen summarizing key project metrics

Figure 5-3. Sample Project Dashboard As of January 20 11 11

Figure 5-2. Sample Quality Management Plan Project Name: Just-In-Time Training Project Introduction The main goal of this project is to develop a new training program that provides just-in-time training to employees on key topics, including supplier management, negotiating skills, project management, and software applications. Quality Standards The standards that apply to this project are summarized as follows: 1. Survey standards: See Attachment 1 for corporate standards for developing and administering surveys to employees. Quantitative and qualitative information will be collected. Quantitative data will use a 5-point Likert scale as much as possible. A corporate expert on surveys will review the survey before it is administered. 2. Supplier selection standards: See Attachment 2 for corporate standards regarding supplier selection. Past performance and developing partnerships will be key issues for this project. 3. Training standards: See Attachment 3 for corporate standards regarding training. The training provided as part of this project will be available in several formats, including instructor-led, CD/ROM, and web-based. Employees will have access to CD/ROM and web-based training at any time to meet individual and business needs on a just-in-time manner. Etc. Team 4 covers this Figure 12

Figure 5-2. Sample Quality Management Plan (continued) Metrics Metrics measure quality performance. Several metrics apply to this project, and more may be developed as the project progresses. The project team will use a few key metrics as follows: 1. Survey response rate: For the survey to be successful, a response rate of at least 30% must be achieved. 2. Course evaluations: All course participants must complete a course evaluation in order for their training to be tracked in our corporate professional development system. In addition to evaluations on more detailed topics, there will be an overall course rating. The average course rating should be at 3.0 or better on a 5.0 scale. Etc. Problem Reporting and Corrective Action Processes Project plans will include clear roles and responsibilities for all stakeholders. The person responsible for an individual task should report problems to appropriate managers (see the project organizational chart) and work with them to determine and implement corrective actions. Major problems should be brought to the attention of the project manager, who should elevate problems that might affect project success, including meeting scope, time, cost, and quality goals, to the project steering committee and then the project sponsor. It is crucial to address problems as early as possible and develop several alternative solutions. Supplier Quality and Control The project manager will closely monitor work performed by suppliers, with assistance from our supplier management department. All contracts must clearly state quality standards, metrics, etc. Etc. 13

Best Practice *Dragan Milosevic, Portland State University, “Delivering Projects: What the Winners Do,” PMI Conference Proceedings (November 2001). Four key practices that best-performing companies follow include the following: • They build an integrated project management toolbox. In other words, they use several standard and advanced project management tools. They tailor these tools to their organizations and provide employees with lots of templates • They grow competent project leaders, emphasizing business and soft skills. These organizations identify good project leaders and provide training, mentoring, and a career path for them • They develop streamlined, consistent project delivery processes. Project management methodologies are well defined and followed • And probably the hardest of all, they install a sound but comprehensive set of project performance metrics. It is difficult defining, measuring, and tracking metrics across an organization, but in order to improve project delivery capability, these metrics are crucial*

Quality Checklists • A checklist is a list of items to be noted or consulted • It helps project teams verify that • a set of required topics or steps has been covered or performed • A single project can have many different checklists, such as for: • Interviewing project team members • Selecting suppliers • Reviewing important documents • Ensuring a room is ready for training

Figure 5-4. Sample Quality Metrics Description Team 4 covers this Figure Project Name: Just-In-Time Training Project The following quality metrics apply to this project: 1. Survey response rate: In order for the survey to be successful, a response rate of at least 30% must be achieved. Most surveys will be administered online using the standard corporate survey software, which can track the response rate automatically. If the response rate is less than 30% one week after the survey is sent out, the project manager will alert the project steering committee to determine corrective action. 2. Course evaluations: All course participants must complete a course evaluation so that their training can be tracked in our corporate professional development system. In addition to evaluations on more detailed topics, there will be an overall course rating. The average course rating should be at least 3.0, with 5 being the highest score. Surveys should include questions measured on a Likert scale. For example, a question might be as follows: “My overall evaluation of this course is ……” Respondents would select 1 for Poor, 2 for Fair, 3 for Average, 4 for Good, or 5 for Excellent. Etc.

Figure 5-5. Sample Quality Checklist

Project Human Resource Management Planning Tasks • Many corporate executives have said, “People are our most important asset.” • People determine the success and failure of organizations and projects • Project human resource management is concerned with • making effective use of the people involved with a project • The main output produced as part of project human resource management planning is • a project human resource management plan, • which includes a project organizational chart, a responsibility assignment matrix, a resource histogram, and a staffing management plan • Other topics, such as motivation and dealing with people problems, are discussed in Chapter 6

Project Organizational Charts • Similar to a company’s organizational chart, a project organizational chart is • a graphical representation of how authority and responsibility is distributed within the project • The size and complexity of the project determines how simple or complex the organizational chart is

Figure 5-6. Sample Project Organizational Chart

Responsibility Assignment Matrices • A responsibility assignment matrix (RAM) is a matrix • that maps the work of the project as described in the work breakdown structure (WBS) • to the people responsible for performing the work • For smaller projects, it is best to assign WBS activities to individuals; • for larger projects, it is more effective to assign the work to organizational units or teams • RACI charts are a type of RAM that show • Responsibility (who does the task), • Accountability (who signs off on the task or has authority for it), • Consultation (who has information necessary to complete the task), • Informed (who needs to be notified of task status/results) roles for project stakeholders

Figure 5-7. Sample RACI Chart R: Responsible A: Accountable C: Consulted I: Informed

Resource Histograms • A resource histogram is a column chart • that shows the number of resources required for or assigned to a project over time • In planning project staffing needs, senior managers often create a resource histogram in which columns represent the number of people needed in each skill category. • By stacking the columns, you can see the total number of people needed each month • After resources are assigned to a project, • you can view a resource histogram for each person to see how his/her time has been allocated

Figure 5-8. Sample Resource Histogram

Staffing Management Plans • A staffing management plan describes • when and how people will be added to and removed from a project • It describes the types of people needed to work on the project, • the numbers needed for each type of person each month, • and how these resources will be acquired, trained, rewarded, and reassigned after the project

Figure 5-9. Sample Staffing Management Plan • Project Name: Just-In-Time Training Project • Introduction • The main goal of this project is to develop a new training program that provides Just-In-Time training to employees on key topics, including supplier management, negotiating skills, project management, and software applications. • Staffing Requirements • This project will require the following internal staff: • Project manager (PM) (Kristin was assigned 3/4 time) • Project team members from the HR department (two people assigned half-time) to help with all the project training • Project team member from the supplier management (SM) department (assigned half-time) to assist with the supplier management training • Information technology (IT) department staff to help with technical support and the software applications training • Project management (PMO) staff to help with the project management training • Contracting department staff to assist in administering the project contracts. See the resource histogram in Attachment A for projected staffing needs over time. • Staff Assignments • The project manager will work through functional managers to assign individuals to the project. The project manager will interview potential candidates to determine suitability. If particular expertise is required for part of the project, the functional managers will plan to make experts available. Employees will be paid overtime if needed. • Training, Rewards, and Reassignment • Ideally, people assigned to this project will have appropriate experience or be willing to learn quickly on-the-job. The project manager will do his or her best to provide a challenging and enjoyable work environment. Assignment to the project will not affect an individual’s salary, but the project manager will write a performance evaluation and recommend appropriate rewards. If an individual is not performing as expected, the project manager will work with him or her and the appropriate functional manager to determine whether corrections can be made or if reassignment is necessary. • Attachment A: Resource histogram Team 4 covers this Figure

Project Communications Management Planning Tasks • Many experts agree that the greatest threat to the success of any project is • a failure to communicate • Many project managers say that 90 percent of their job is communicating, • yet many project managers fail to take the time to plan for project communications • Project communications management involves • generating, collecting, disseminating, and storing project information • Key outputs include a communications management plan and a project Web site

What Went Wrong? An amusing example of miscommunication comes from a director of communications at a large firm: I was asked to prepare a memo reviewing our company’s training programs and materials. In the body of the memo in one of the sentences, I mentioned the “pedagogical approach” used by one of the training manuals. The day after I routed the memo to the executive committee, I was called into the HR director’s office, and told that the executive vice president wanted me out of the building by lunch. When I asked why, I was told that she wouldn’t stand for perverts (pedophiles?) working in her company. Finally, he showed me her copy of the memo, with her demand that I be fired—and the word “pedagogical”—circled in red. The HR manager was fairly reasonable, and once he looked the word up in his dictionary and made a copy of the definition to send back to her, he told me not to worry. He would take care of it. Two days later, a memo to the entire staff came out directing us that no words that could not be found in the local Sunday newspaper could be used in company memos. A month later, I resigned. In accordance with company policy, I created my resignation memo by pasting words together from the Sunday paper.

Communications Management Plans • Because project communication is so important, every project should include a communications management plan—a document that guides project communications • The plan will vary with the needs of the project, but some type of written plan should always be prepared and address the following items: • Stakeholder communications requirements • Information to be communicated, including format, content, and level of detail • Identification of who will receive the information and who will produce it • Suggested methods or guidelines for conveying the information. • Description of the frequency of communication • Escalation procedures for resolving issues • Revision procedures for updating the communications management plan • A glossary of common terminology used on the project

Figure 5-11. Sample Communications Management Plan (partial) Team 4 covers this Figure Project Name: Just-In-Time Training Project 1. Stakeholder Communications Requirements Because this project involves many people from all over the company as well as outside suppliers, the project team will use surveys, interviews, checklists, and other tools and techniques to determine the communications requirements for various stakeholders. Employees will have specific communications needs in that several training programs are being totally changed, and they will likely be uncomfortable with those changes. Suppliers will have communications needs to ensure that they are developing courses that will meet our organization’s needs. Internal experts providing content will have communications needs related to providing useful information and products. 2. Communications Summary The following table summarizes various stakeholders, communications required, the delivery method or format of the communications, who will produce the communications, and when it will be distributed or the frequency of distribution. All communications produced will be archived and available on the project web site. As more communications items are defined, they will be added to this list. The project team will use various templates and checklists to enhance communications. The team will also be careful to use the appropriate medium (that is, face-to-face meeting, phone, e-mail, hard copy, web site, and so on) and follow corporate guidelines for effective communications. Note the comments/guidelines as well.

Project Web Sites • Project Web sites provide • a centralized way of delivering project documents and other communications • Some project teams also create blogs— • easy-to-use journals on the Web that allow users to write entries, create links, and upload pictures, while allowing readers to post comments to particular journal entries • Project teams can develop project Web sites using • Web-authoring tools, such as SharePoint Designer or Macromedia Dreamweaver; • enterprise project management software, if available; • or a combination of the two approaches • Part of the Web site might be open to outside users, whereas other parts might be accessible only by certain stakeholders • It is important to decide if and how to use a project Web site to help meet project communications requirements

Figure 5-12. Sample Project Web Site

Project Risk Management Planning Tasks • PMI defines a project risk as an uncertainty • that can have a negative or positive effect on meeting project objectives • Note that some people only view risks as negative • and call positive risks opportunities • Key outputs include • a risk management plan, • a probability/impact matrix, • a risk register, • and risk-related contractual agreements

Risk Management Plans • A risk management plan documents • the procedures for managing risk throughout the life of a project • The general topics that a risk management plan should address include • the methodology for risk management, • roles and responsibilities, • budget and schedule estimates for risk-related activities, • risk categories, • probability and impact matrices, • and risk documentation

Other Risk Plans • Contingency plans are • predefined actions that the project team will take if an identified risk event occurs • Fallback plans • are developed for risks that have a high impact on meeting project objectives, • and are put into effect • if attempts to reduce the risk are not effective; • sometimes called contingency plans of last resort • Contingency reserves or contingency allowances are • funds held by the project sponsor • that can be used to mitigate cost or schedule overruns if unknown risks occur

Figure 5-13. Sample Risk Management Plan Team 4 covers this Figure Project Name: Just-In-Time Training Project 1. Methodology The project team will review data available from the Phase I project and past training programs within Global Construction to assist in risk management planning. They will also review information related to external projects similar to this one. The team will use several tools and techniques, including brainstorming, surveys, and risk-related checklists to assist in risk management. 2. Roles and Responsibilities The project manager will be responsible for leading the team and other stakeholders in performing risk-related activities. As detailed tasks and deliverables are determined, the project manager will delegate those tasks as appropriate. 3. Budget and Schedule As specific risk-related tasks and deliverables are determined, budget and schedule information will be provided. 4. Risk Categories General categories and subcategories for risk on this project include business risks (suppliers and cash flow), technical risks (course content, hardware, software, and network), organizational risks (executive support, user/employee support, supplier support, and team support), and project management risks (estimates, communication, and resources). 5. Risk Probability and Impact Risk probability and impact will initially be estimated as high, medium, or low based on expert advice. If more advanced scoring is needed, the project team will determine an appropriate approach. 6. Risk Documentation All risk-related information will be summarized in a risk register. Detailed documentation will be available in a secure area on the project web site.

Risk Events and Probability/Impact Matrices • Risk events refer to specific, uncertain events that may occur to the detriment or enhancement of the project • Negative risk events include the performance failure of a product produced as part of a project, • delays in completing work as scheduled, • increases in estimated costs, • supply shortages, • litigation against the company, and strikes • Positive risk events include completing work sooner than planned or at an unexpectedly reduced cost, • collaborating with suppliers to produce better products, • and obtaining good publicity from the project • You can chart the probability and impact of risk events on a matrix

Figure 5-14. Sample Probability/Impact Matrix Schwalbe, Information Technology Project Management, Sixth Edition, 2010

Risk Registers • A risk register is a document that contains the results of various risk management processes • and is often displayed in a table or spreadsheet format • It is a tool for documenting potential risk events and related information, including: • An identification number for each risk event • A rank for each risk event (usually high, medium, or low) • The name of the risk event • A description of the risk event • The category under which the risk event falls • The root cause: The real or underlying reason a problem occurs • Triggers: Indicators or symptoms of actual risk events • Potential responses to each risk event • The risk owner, or person who will own or take responsibility • The probability of the risk event occurring • The impact to the project if the risk event occurs • The status of the risk event

Figure 5-15. Sample Risk Register

Risk-Related Contractual Agreements • Work done by outside suppliers or sellers should be well documented in contracts, • which are mutually binding agreements • that obligate the seller to provide the specified products or services, • and obligate the buyer to pay for them • Project managers should include clauses in contracts to help manage project risks by using: • Incentive or penalty clauses • Certain types of contracts, such as fixed-price contracts, • to reduce their risk of incurring higher costs than expected • Competition for supplying goods and services • to help reduce negative risks and enhance positive risks on projects

Figure 5-16. Sample Guidelines for Risk-Related Contractual Agreements Team 4 covers this Figure • The following guidelines are provided for your consideration as you make decisions develop contracts/agreements between Global Construction (the buyer) and its suppliers (the sellers). Be sure to work with a member of the contracting department to write your specific contracts. All contracts must be reviewed and signed by the legal department, as well. • Contract termination clauses: These clauses list circumstances under which the buyer and/or seller can terminate a contract and how final payment will be settled. All the contracts must include a termination clause. • Incentive clauses: These clauses provide incentives for the seller to provide goods or services at certain times, of certain quality, and so on. Incentive clauses can include extra payments or profit sharing, if appropriate. • Penalty clauses: These clauses specify penalties that will be applied when the seller does not provide goods or services as specified in the contract. For example, if a product is delivered late, the seller might be required to pay a certain dollar amount for each day the product is late. • Fixed price contracts: To minimize the negative risk of paying more than planned for specific goods or services, Global Construction issues fixed priced contracts, which specify that the seller agrees to a fixed price and bears the risk if it costs more to provide the goods or services than originally assumed. • Competitive contracts: In many situations Global Construction can use competition to help reduce risks. In addition to reviewing bids from several sellers, a good strategy may be to award two small contracts and then award the following larger contract to the seller that does the best job on the first job.

What Went Right? • The Petronis Twin Towers in Malaysia are famous landmarks in Kuala Lumpur. They were the tallest buildings constructed at the time, and the first large construction project to use GPS (Global Positioning System). Over 7000 people were working on the site during the peak of construction. • The project management team decided to use competition to help keep the project on time and on budget. • The Japanese firm Hazama Corporation led the construction of Tower 1, and the Korean firm Samsung Engineering Co. led the construction of Tower 2. • Because the towers were constructed simultaneously, everyone could see the progress of the two competitors as the 88-story towers rose into the sky. • “Construction of the towers was fast paced, thanks in part to the decision to grant two contracts, one for each tower, to two separate contractors. This naturally created a competitive environment, to the benefit of the building.”* *Cesar Pelli and Michael J. Crosbie, “Building Petronas Towers,” Architecture Week (February 19, 2003).

Project Procurement Management Planning Tasks • Project procurement management includes • acquiring or procuring goods and services for a project from outside the organization • As the business world continues to become more competitive and global, • more and more projects include procurement, • often referred to as outsourcing • Key outputs include • make-or buy analysis, • procurement management plans, • procurement statements of work, • procurement documents, • source selection criteria, • and change requests

Make-or-Buy Analysis • Make-or-buy analysis involves • estimating the internal costs of providing a product or service, • and comparing that estimate to the cost of outsourcing • Many organizations use make-or-buy analysis, often called a lease-or-buy analysis, • to decide if they should purchase or lease items for a particular project • Example: Assume you can lease an item you need for a project for $800/day. • To purchase the item, the cost is $12,000 plus a daily operational cost of $400/day. • How long will it take for the purchase cost to be the same as the lease?

Make-or-Buy Solution • Set up an equation so both options, purchase and lease, are equal • In this example, use the following equation. Let d be the number of days to use the item $12,000 + $400d = $800d Subtracting $400d from both sides, you get: $12,000 = $400d Dividing both sides by $400, you get: d = 30 • If you need the item for more than thirty days, it would be more economical to purchase it

Figure 5-17. Comparing the Cost of Leasing Versus Buying

Figure 5-18. Sample Make-or-Buy Analysis Team 4 covers this Figure Project Name: Just-In-Time Training Project Background: Global Construction wants to train 100 employees and will consider having the employees sent to an outside course (Buy option) or provide the education using internal employees (Make option). Assuming 20 participants/class and 2 days average course length, 10 total days of training will be needed. Assume 500 of online facilitation will be needed as well (5 hours per participant). Decision Being Analyzed: Project management training Option 1:(Make): Use in-house instructors for the instructor-led basic project management training and facilitation for online materials (includes purchasing course materials) Estimated cost per hour for in-house trainer (excludes participant time): $60 Estimated training hours: 80 (10 total days of training X 8 hours per day) Subtotal: $4,800 (80 hours X $60 per hour) Materials cost: $7500 ($75/participant/course, 100 participants total) Estimated cost per hour for online facilitation (excludes employee time): $60 Estimated hours: 500 Subtotal: $30,000 (500 hours X $60 per hour) Total: $42,300 ($4,800 + $7,500 + $30,000) Option 2:(Buy): Outsource instructor-led basic project management training and facilitation for online materials (includes course materials) Estimated cost for class per participant = (Estimated Cost X Number of Days) = $500 X 2 days = $1,000 Cost of instructor-led classes ($1,000 X 100 participants) Subtotal: $100,000 Estimated cost per hour for online facilitation (excludes student time): $100 Estimated hours: 500 Subtotal: $50,000 (500 hours X $100 per hour) Total $150,000 ($100,000 + $50,000) Cost Difference: $150,000 - $42,300 = $107,700 Recommendation: Because we have qualified internal staff and can purchase suitable materials, we recommend Option 1, in which we conduct the basic project management training in-house.

Procurement Management Plans • A procurement management plan is a document • that describes how the procurement processes will be managed, • from developing documentation for making outside purchases or acquisitions to contract closure • Topics addressed include: • Guidelines on types of contracts to be used in different situations • Standard procurement documents or templates to be used, if applicable • Guidelines for creating contract work breakdown structures, statements of work, and other procurement documents

Procurement Management Plans Topics addressed include (Cont’d): Roles and responsibilities of the project team and related departments, such as the purchasing or legal department Guidelines on using independent estimates for evaluating sellers’ cost proposals Suggestions on managing multiple providers Processes for coordinating procurement decisions, such as make-or-buy decisions, with other project areas Constraints and assumptions related to purchases and acquisitions Lead times for purchases and acquisitions Risk-mitigation strategies for purchases and acquisitions, such as insurance contracts and bonds Guidelines for identifying prequalified sellers and organizational lists of preferred sellers Procurement metrics to assist in evaluating sellers and managing contracts 50

Chapter 5: Planning Projects, Part II (Quality, Human Resource, Communications, Risk, and Procurement Management)